LA / Long Beach Port Program Report From The Real World - No Issues, But Concern...

Implications: The contentious LA / Long Beach Emissions programs have started without disruption. My colleague Mr. Schultz gives a good overview of the program, litigation, etc, so I’ll offer some numbers and a few comments and about what is happening on the ground today.

Analysis: The first step in the LA / Long Beach Ports Intermodal Emission program kicked in October 1. The net result was that it banned about 1,500 trucks that were older than 1989 from entering the ports. Looking at the numbers, container business through the ports is down 10% from last year due to a softening economy. This says that the estimated truck count last year of 16,800 can be covered with about 15,150, which is the number of access permits issued. This means that just from this perspective, freight would be covered.

Truth-be-known, some of these older units are still pulling containers, but from trucking company yards to their destination - as they have in the past. Fleets have made some moves in steps for years 1.) getting containers out of port; then 2.) getting container to receiver dock for appointment. One can use compliant trucks to pull the containers from the port to the trucking company or other staging yards in this flow. Otherwise, some had pulled their older trucks anyway early this year after peak holiday container flow and when freight started slowing.

Truck financing and rebate numbers versus the port Intermodal trucking financial model is a tougher issue. We think Daimler Truck Financing have approved a couple hundred new and late-model trucks now that will go into the program - with other OEMs with smaller numbers. We have been trying to help some - and credit is a problem (no surprise).

For those making truck payments today, the issue may be a monthly payment increase, but the bigger issue is the residual versus amount owed. Otherwise, the average pretax income for LA / Long Beach operators is about $30,000+ per year on a gross of $65,000+ (less fuel and all other operating expenses). Truck replacement net cost (truck cost less rebate) can end up as low as $25,000 or about $600 per month. Add in higher taxes / registration and subtract lower fuel and maintenance - and planning numbers come out an estimated $500 per month / $6,000 per year. This takes the net take home for operators’ drops down to $24,000 - ouch! One can see the issue - one that the Teamsters are playing loudly.

Looking ahead, it will be interesting to see how Knight Transportation and Swift get involved. It will offer them opportunities for both moving containers and selling compliant equipment to operators. The next step is January 1, 2010 where all trucks must be 1993 and newer emissions compliant.